A 41 year old man from Selangor – on a special Air Asia flight bringing Malaysians and non-citizen family members home from epic centre Wuhan landed in KLIA at 5:57 am Tuesday 4 February – became the first Malaysian tested positive for Covid19.
After a local largest cluster linked to a Tablighi Jamaat religious gathering held in Sri Petaling, Kuala Lumpur in late February and early March, leading to massive spikes – the largest cumulative number of
confirmed COVID-19 infections in Southeast Asia then – a nationwide Movement of Control Order (MCO) was promulgated on 16th March 2020.¹
Consequently, the leading economic indicators are pointing to the sharpest contraction since the 1998 Asian Financial Crisis recession. With the economy being infected by the COVID-19 pandemic and the Movement Control Order (MCO), there was a contraction of 17.1% by the 2nd quarter (2Q20) already, [channelasianews @2:00pm 14th August 2020].
Central bank governor Nor Shamsiah Yunus, Bank Negara Malaysia, said that the sectors worst hit by the pandemic were tourism, manufacturing and investment. On a seasonally adjusted quarterly basis, the economy shrank by 16.5 percent, the worst contraction since the series began in the second quarter 2000.
Household consumption slumped 18.5% (vs 6.7% in Q1), while fixed investment plunged 28.9% (vs -4.6% in Q1). In addition, net external demand was negatively impaired to the GDP as both exports and imports fell sharply, [tradingeconomics.com, 14/08/2020].
This pandemic is having devastating effects on the Malaysian economy from both external factors (the immediate global supply and demand shocks) and the accompanying domestic factors once the Mandatory Control Order was in place.
Critically, this economic effect is disproportionately impacting smaller businesses and vulnerable groups such as lower-income individuals and precarious workers who are at the B40 population segment, (Calvin Cheng, Covid19 in Malaysia: Economic Impacts and Fiscal Responses, Institute of Strategic and International Studies, Malaysia, 2020).
Even before the lockdown measures were implemented, the outbreak of the new coronavirus in China had created wide-ranging supply and demand shocks that have reverberated across the globe. Commodity exporters around the world endured lower prices as Chinese demand collapsed, while global manufacturers and transnational corporations faced production cuts as Chinese factories were locked down.
In Malaysia, the effects of this China’s supplies disruption are uncomfortable to weather. The Malaysian economy is amongst the most highly exposed economies in the region to both the Chinese demand and supply. China is Malaysia’s number one trading partner, a large source of foreign investments, and its top tourist source outside of ASEAN.
Additionally, over the past decade, Malaysian firms have become amongst the most deeply integrated to it’s own global production networks. This is compounded by the fact that regional supply chains have become increasingly China-centric. Indeed, more than a quarter of Malaysia-China trade (about US$20 billion in 2018) consist of intermediate components – exactly the kind of products and sub-component parts that gets mostly affected when global supply chains are interrupted or worst, disrupted.
The enmeshed and closely linked supply chain is one aspect in a modern economy. It used to be closely related to the Global North transnational corporations exploiting precarious labour in Global South as part of what is commonly known as the monopoly-capitalism dimension. Now that the Malaysia dependence on China’s
trade is so acute that its diplomacy with China is one of acceptance and adaptability, especially to the South China Sea territorial and maritime issues, (South China Sea: Malaysia to stick with ‘quiet diplomacy’ towards Beijing in dispute, analysts say, http://www.isis.org.my)
In manufacturing production process, supply chains have contributed to the rapid expansion of production at lower cost, with companies able to achieve fragmented, task-based specialisation in the name of just-in-time production. That has enabled more small and medium-sized companies and their workers to join in the international production networks. To those companies requiring to hold reserves of inventory for just-in-time delivery is throwing sand in the gears of smooth and seamless global manufacturing.
Forces of comparative advantage and specialisation that fragment production across different geographical locations and forces of agglomeration and the contribution in the economies of scale help to shape the links and wheels of each supply chain process. Businesses diversify to manage risk and their viability and profitability depend on making the right decisions where to invest, and where are their suppliers, and where are these factory sites in relations to components availability in the supply chain connections.
Therefore, poor policy prescriptions often threaten business dynamism and investment and the world is going to need both to recover from the COVID-19 crisis and to improve upon employment across the globe.
Denton and Bruckard warn that ‘nativist policies aimed at concentrating industries in one place – “reshoring” or “regionalising” supply chains – will likely undercut competitiveness, raise consumer prices and render entire industries more vulnerable to smaller, localised and more frequent shocks like floods, blackouts or social upheaval’. Many companies may choose to shorten supply chains but governments should be careful about implementing economic nationalism policies that encourage that as this approach invites risk of disinvestment from any FDI initiative.
Many Japanese multinationals are already reorganising their supply chains in Asia regardless of the ‘China-exit’ subsidy. Japanese companies have been restructuring their supply chains in Asia and investments over time due to rising labour costs in China. The ‘China plus one’ strategy of diversifying investment has been common practice for years. The subsidies – in the form of Free Trade Zones, exemptions from corporate taxes or transferring pricing being acceptable – may be welcomed by investors, but these incentives are simply regarded as a form of corporate welfare or privileging in doing business abroad.
Comprehensive supply chain resilience requires a multi-layered approach. To reduce supply chain vulnerability governments have committed to forgo tariffs and export controls – ensuring free trade in goods and services – and facilitate the construction of digital infrastructure that helps to manage supply chain ease in goods movement and their transactions processing timely and accurately.
It needs to emphasize that an openness to foreign direct investment shall help businesses to mitigate risk factors. Developing digital infrastructure and creating international regulatory coherence towards digital trade protocols will also in a way enhance visibility across supply chains beyond immediate tier-one suppliers. Besides, the implementation of regional data privacy standards, tax and other incentives to share data should be able to.encourage a wider usage of digital networks when doing business transactions.
These economic factors imbedded within respective countries do not hide the fact that they had engendered more millionaires and billionaires whether through capitalism mode of production in top glove manufacturing or as a result of financialisation of capitalism through digitalisation processing and transactions.
However, Malaysia is in dire present and imminent crises because her External Debt had increased to $1,002,956 Million in the second quarter of 2020 from $975,907 MYR Million in the first quarter of 2020, with a projected RM$1.2 Trillion by year end.
As a sideline, Norway and Malaysia began oil and gas exploration at about same time, both having the same size of hydrocarbon reserves, but while Norway managed her bounty carefully to hold one of the world’s largest sovereign funds from O&G development – exceeding one trillion USD in value – whilst Malaysia has a national debt exceeding one trillion, and rising, likely upsurging to RM$1.26T by end of 2020.
Together with an economically slower recovery seen in Malaysia’s labour market, (Tan Siew Mung, theedgemarkets.com), and the inadequacy in the packaged economic stimuli thus far, as a comparison, the stimulus packages unveiled during the Global Financial Crisis in 2008-2009 amounted to RM67 billion (or 8.4 per cent of GDP) – more than three times larger than the planned RM20 billion (only about 1.4 per cent of GDP) presently. It is because the national coffer has been depleted through years of kleptocracy under an ethnocratic regime.
The challenge going forward may mean to gradually wind down some of these stimulus measures and move towards a more targeted approach to help those that are particularly vulnerable, as well as rebuilding the country’s fiscal space and balances to prepare for the next crisis, (World Bank, 2020). Another consultancy firm, the FitchSolutions has this to say: the economy is still under heavy downside pressure from the Covid-19 pandemic and the nascent recovery following the deep contraction in 2Q20 remains vulnerable and will require more policy support for capital formation.
With the political instability, foreseen post-GE14 PH governance, and the unstable PN government that may be changed anytime, whether it is due to administrative incompetency and/or persistent corrupt practices, and the surge of Covid19 in Sabah state owing to scarce allocation of
resources throughout the 5 decades of an ethnocratic rule, it is relevant, and appropriate, to ask whether the present economic approach relating on capitalism as the engine of growth is viable.
MALAYSIA has been a place where large fortunes were amassed. The Kuoks, Tehs and Queks were the pioneers in the palm oil, property and banking sectors during the British Empire, while the YTLs’ and Berjayas’ and Annans’ were maintained and retained by transnational connections in the post-independence neo-colonialism period, and the GLCs and NGCs (non-government corporations) sustained with and by various ethnocratic and kleptocratic regimes since.
Sixty-plus years later, the country is still managed on a neo-liberal economic platform which is latched to supply chaining with transnational corporations that, with the onslaught of the COVID-19 pandemic, has only accentuated the inter-connection of ecological, epidemiological, and economic vulnerabilities as imposed by monopoly capitalism. This is because the transnational corporation is not only a product but the process of concentration and centralization of capital that had created monopoly capital itself. One need to acknowledge that the accumulation of capital has always meant expansion – commercially and politically. This process of growing and spreading with a global scope has an imperialistic in its characteristics besides the rather deep qualitative transformation in the organization and dominance of monopoly capital based on financialization, the wide exploitation of peripheral countries’ natural resources and the comparative advantages derived from global labour arbitrage on the continuation of significant wage differentials between various countries in different geographical regions. This constructing of monopoly capital on an immense scale has given contemporary imperialism a new dimensional appearance (Suwandi and Foster, 2020), and the country need to ask whether to perpetuate the development of underdevelopment within states, and to harm the our economies ahead.
A better approach is not through capitalism but a socialism platform where the distribution of wealth, regardless of race, creed or state location, is paramount to propelling country forward with an Malaysian identity.
LIST OF REFERENCES
1] By 16 March, a nationwide “Movement Control Order” (MCO), intended to mitigate the spread of COVID-19 through social distancing, was announced to be in effect between 18 and 31 March
On 25 March, the MCO was extended by an addition two weeks, until 14 April, as the rate of new cases per day remained consistently high. The MCO was further announced to be extended until 28 April on 10 April, and to 12 May on 23 April. A gradual easing of restrictions was implemented in stages, first with the announcement of a “Conditional Movement Control Order” (CMCO) on 1 May, which allows most businesses to open on 4 May under strict standards of practice, followed by a “Recovery Movement Control Order” (RMCO) from 10 June. Originally slated to expire on 31 August, the RMCO has been further extended to 31 December 2020, with selected sectors remaining closed and strict travel restrictions from multiple countries remaining in effect due to continued detection of imported cases.
2] By 18th August, Top Glove Corp Bhd is the second most valuable stock on Bursa Malaysia, having displaced Public Bank Bhd. And the gap between Top Glove and the local bourse’s No. 1 Malayan Banking Bhd (Maybank) is narrower than ever. At the closing bell on Wednesday, Top Glove’s shares gained 4.06 per cent to RM27.14 with 26.13 million units traded, pushing its market capitalisation (market cap) to RM73.47 billion.
Yet at a time of overall national calamity, a convergence of ecological, pandemic and economic proportions, Knight Frank estimates Malaysia capital accumulation of wealth-creation is the 10th fastest in the world – while the mean income was RM7,901 last year – the firm’s 2020 Wealth Report projects that the number of Malaysians with more than US$30 million will swell by 35 per cent between 2019 and 2024, compared with 2 per cent between 2018 and 2019. And all this happens during a shift in economic activity from production to financial activities –convergence-share tradings – often generating higher private rewards disproportionate to their social productivity according to James Tobin, (Nobel Prize in Economics 1981); see the case of China’s socialism with a Chinese character below:
China now has a total of 878 billionaires. The US had 626 people in the top bracket at the start of the year, according to Hurun in its February global list.
The report found that there were around 2,000 individuals with a net worth of more than 2 billion yuan ($300 million) in August, giving them a combined net worth of $4 trillion.
Jack Ma, founder of e-commerce titan Alibaba, once again topped the list after his wealth surged a whopping 45 percent to $58.8 billion as online shopping firms saw a surge in business owing to people being shut indoors for months during strict lockdowns to contain the virus.
He was followed by Pony Ma ($57.4 billion), boss of gaming giant and WeChat owner Tencent who made an extra 50 percent despite concerns about his firm’s US outlook after it was threatened with bans there over national security fears.
shttps://www.google.com/amp/s/monsoonsstorms.wordpress.com/2016/03/02/financialization-capitalism-
Firestorms 